The Moral Responsibility of Firms: for Or Against?

The Moral Responsibility of Firms: For or Against?

When business behaves badly, who is held morally responsible? The firm or the individual?

The post-financial crisis world is becoming a more responsibility business-critical one. There are unprecedented levels of scrutiny of large corporations and their The first set of speakers we gathered were all actions and those who fall foul of the law face a more proponents of corporate moral agency, but they severe backlash than before. approach the problem in different ways. Peter French, the Lincoln Chair in Ethics, Professor of This is breathing new life into the debate around Philosophy at Arizona State University and an early corporate moral responsibility and the extent to proponent writing over thirty years ago, argued that which business organisations can be correctly said acts of individuals within a corporation become the to have moral responsibilities and obligations. In intended acts of that corporation on the basis of a philosophical terms, the question is posed as one of Corporate Internal Decision (CID) structure. French the “moral agency” of organisations. Nonetheless, shared his latest thinking on “corporate diachronic in practice, we speak readily of BP “being moral responsibility”—responsibility over time. responsible” for the Gulf of Mexico oil spill—it is French asked: “Is BP today morally responsible for considered morally blameworthy—and actions are the Deepwater Horizon disaster of April 2010?” taken against the company. Under Anglo-American French offered two ways of addressing the problem, law, at least, a corporation such as BP is considered by looking at firm operational mechanisms and a legal person, but is it a moral person? corporate self-narratives as indicators of agent sameness. French noted that the moral It is often argued that only individual human beings responsibility of firms and individuals are not can be morally responsible and that the actions of a mutually exclusive; both BP and its managers can be firm are those of its individual members. Corporate morally responsible for the Deepwater Horizon moral agency raises the possibility that a disaster. corporation can be considered morally responsible and accountable for an action but no individual Katsuhito Iwai, Distinguished Fellow at The Tokyo person. The recent INSEAD-Wharton ethics Foundation, advanced his view of a “two-story” conference, The Moral Responsibility of Firms: conception of the corporation, according to which, For or Against? brought together fresh corporations can be ethical agents because they can perspectives and the latest ideas on this issue. be thought of as rational agents free to choose ethical ends in spite of shareholders’ pursuit of Making the case for corporate moral profits. Philip Pettit, the Laurance S. Rockefeller Visit INSEAD Knowledge http://knowledge.insead.edu 01

Copyright © INSEAD 2021. All rights reserved. This article first appeared on INSEAD Knowledge (http://knowledge.insead.edu). University Professor of Politics and Human Values at Those opposed Princeton University, made his argument in support of corporate moral agency on the basis of five key Four speakers opposed to the idea of corporate claims, including the claim that the corporation is a moral agency, both on theoretical grounds and in “conversable agent”. The corporate group makes light of its implications also made their case. Thirty commitments via its words and generally lives up to years ago, Manny Velasquez, of Santa Clara them and we hold corporations responsible if they University, in response to French, claimed that don’t keep to their word. In his view, the corporation corporate acts do not originate in the corporation has a voice of its own, distinct if not different from but in the corporation’s members. He asserted that those of its members. Like French, Iwai and Pettit every organisational act is causally produced by its urged that we can and should hold both individuals organisational members; drawing a parallel with a and groups responsible, avoiding a potential wind-up toy, he pointed to the winding-up of the toy responsibility deficit where only a group is held as indicative of the individual responsibility for the responsible and not the individuals involved. actions of the toy. Citing the example of misconduct at National Semiconductor, Velasquez made the Other speakers also advanced the case for case that it is important to reject the idea of moral corporate moral agency. Michael Bratman, responsibility of organisations because it lets Professor of Philosophy at Stanford University, individuals off the hook, innocent parties get Christian List, Professor of Political Science and punished, and it takes away the incentive for Philosophy at the London School of Economics, individuals not to again engage in misconduct. Raimo Tuomela, Professor of Philosophy at the University of Helsinki and Geoffrey Hodgson, Drawing on multiple examples, Ian Maitland, Research Professor of Business Studies at Professor of Strategic Management and Hertfordshire Business School, focused on Entrepreneurship at the University of Minnesota, intentionality. Bratman extended his work on the also asserted that the idea of corporate moral shared agency of small groups to suggest it might agency can give rise to morally unacceptable also apply to larger more complex organisations, outcomes, including the possibility of the officers of such as firms. For Bratman, shared intentions of a a firm being unaccountable for its actions. He group and shared framework policies entailing concluded that the anthropomorphism of the commitment to action are sufficient conditions for corporation does not humanise the corporation but group intention. This understanding also gives rise rather dehumanises individuals. According to David to the possibility of “discontinuities”, where there Ronnegard, a visiting scholar at INSEAD, whose can be group intentions that are not the shared recent published work builds on that of Velasquez, intentions of the members of the group. at the heart of the matter is whether a corporation can be morally responsible without any of its List observed that we hold human beings morally members being morally responsible. In his view, responsible because they are intentional agents (in autonomy debunks the idea of corporate moral contrast to, say, an avalanche). We can hold firms agency because autonomy demands that we must responsible where three jointly necessary and be consciously aware of the choices we make and sufficient conditions are found: 1) Normatively corporate structures (CIDs) are not aware of significant choice (possibility of doing something anything. good or bad, right or wrong); 2) Access to relevant information (the agent understands and has the While John Hasnas, Associate Professor of Business evidence available to make judgments about the at Georgetown University, accepts that corporate options); 3) Control over the choice of option. These moral agency might be feasible theoretically, he conditions do not hold for all collectives (e.g., argued that it only has practical significance as a crowds, stampedes). Tuomela identified “we- means of authorising the punishment of corporations mode” groups as groups organised for action on the as collective entities and he concluded that this is basis of “we-thinking”. He differentiated between not desirable. Corporate moral agency is not extrinsic and intrinsic intentionality, observing that necessary to punish individual wrongdoers within even a we-mode group is not literally an agent an organisation, to require an organisation to make (person) and thus cannot be responsible in terms of restitution for the wrongdoing of its employees, to intrinsic intentionality because it only has subject an organisation to administrative regulation, extrinsically intentional attitudes. However, group or to criticise an organisation. In his view, it is responsibility may be something extrinsically impossible to punish a corporation; the punishment attributed to groups and thus many organised inevitably passes through to consumers, employees groups can be regarded as morally responsible. and shareholders. To illustrate the unjustness of this Hodgson argued in favour of accepting collective approach, Hasnas points out that the Nazis operated intentionality on the grounds that a firm is greater on this principle in occupied France during the than the individuals who make it up. Second World War, by punishing innocent members of communities where sabotage was occurring to Visit INSEAD Knowledge http://knowledge.insead.edu 02

Copyright © INSEAD 2021. All rights reserved. This article first appeared on INSEAD Knowledge (http://knowledge.insead.edu). deter acts of resistance. Ryan Burg, Assistant Professor in the Faculty of Management at the University of Moscow, brought a In response, various participants pointed out that monetary perspective to the question, asking the these parties might not be so innocent or should audience to imagine an economy that issued a have engaged in sufficient due diligence so as to traceable, reclaimable moral currency, in which avoid being in the situation where they are punished morally questionable business actions would have for corporate misconduct (e.g., shareholders of less value than moral ones. Finally, Nien-he Hsieh, banks punished for rigging LIBOR). Associate Professor of Business Administration at Harvard Business School, asked whether, if we The unemotional corporation assume no corporate moral agency, we can appropriately ground the actions of a firm in Amy Sepinwall, Assistant Professor, Department of individual agency. He explored, by way of contrast Legal Studies and Business Ethics at The Wharton with the overriding emphasis on misconduct and School, University of Pennsylvania, contended that a punishment in earlier presentations, situations capacity for emotion is necessary for knowing the where there are positive outcomes, such as difference between right and wrong, thus arguing pharmaceutical companies providing access to that corporations are not persons. However, she essential medicines. then asserted that corporate personhood is a red herring and not necessary or sufficient for attention Individuals and firms responsible to the corporate rights or moral responsibility of firms; in her view, these are normative and political Theoretically, a strong case can be made for the questions instead. In a similar vein, Kendy Hess, moral responsibility of firms. However, this does Assistant Professor of Ethics at Holy Cross, observed not preclude individual moral responsibility for acts that the philosophical debate does not have to be as a corporate member. Moreover, it was also resolved to address the important problems of evident that considerable concern exists about corporate moral responsibility. In contrast, corporate misconduct going unsanctioned and the however, she questioned the assumption of human possibility that both good and bad corporate psychology as a necessary condition in determining behaviour is profoundly influenced by the extent to corporate moral agency. On a more pragmatic which individuals and corporate entities are held level, she also highlighted the messiness of morally responsible. organisational decision-making, questioning the simplistic model of controlling individual decision- makers in organisations and noting the distributive decision-making often found in organisational contexts. Richard De George, University Distinguished Professor at the University of Kansas, N. Craig Smith is the INSEAD observed that the discipline of business ethics does Chaired Professor of Ethics and Social Responsibility not in fact need to reach a final determination on the at INSEAD. The conference on Carol and Lawrence question of corporate moral agency as the law Zicklin Centre for Business Ethics and Research at clearly accepts that corporations can be held the Wharton School. responsible, whether legally or morally. Follow INSEAD Knowledge on Twitter and Facebook Other speakers looked beyond the direct question of whether there is moral responsibility of firms to related considerations. Waheed Hussain, Assistant Find article at Professor of Legal Studies and Business Ethics and of https://knowledge.insead.edu/responsibility/the-moral- Philosophy at the Wharton School, offered a responsibility-of-firms-for-or-against-3243 “normative functionalism” perspective, suggesting that treating corporations as independent agents serves a particular function. R. Edward Freeman of Download the Knowledge app for free the Darden School of Business and University Professor at the University of Virginia, also offered a meta-analytic perspective, remarking that the debate is framed by particular uses of language and highlighting the fact that most business activity is not that of large corporations. Teemu Ruskola, Professor of Law at Emory Law, noted how treatment of the question of moral responsibility of firms is coloured by cultural differences in theories of the firm, distinguishing between Western liberal views, state socialism, and Chinese Confucianism. While Visit INSEAD Knowledge http://knowledge.insead.edu 03